Stability of collusion in differentiated oligopolies is studied without symmetry restrictions on the available strategies. It is demonstrated that if the number of firms is sufficiently large, two-phase stick-and-carrot punishment schemes apply at the highest possible discount rate with respect to collusion on the joint profit-maximizing output. If stick-and-carrot punishment schemes are used, collusive stability of the joint profit-maximizing output improves monotonically with the degree of product differentiation. The conclusions contrast with those obtained by Wernerfelt [Economics Lett. 29 (1989) 303].
- Product differentiation